Confused or Depressed? The State of Financial Advising

 Would you be completely baffled if you encountered this road sign while you were driving?  Would you know what to do, which way to go?

I can guess your answer, and that is why I chose this picture as a graphic illustration of today’s financial advice.  Listen to too many “experts,” read too many financial advice columns, and you will soon discover how confusing and even contradictory they can be.  Why is that so?  Why, for example, does one expert say you are financially secure in retirement if you start out with $500,000 while another says, oh no, you need $2 million?  Why does one source say you can safely withdraw/spend 8% of your retirement savings each year and still not outlive your savings, while another says 4% is the safest route, and yet another says 2.7% is the max you should be taking out annually if you want to be certain not to run out of money by the time you are age 95?

Part of the disparity is the assumptions from which each advisor works.  In the examples above, one advisor might assume that the retiree is invested more heavily in stocks than in bonds.  Another might project that the stock market will perform better than his peers would predict.  But I believe there’s more than just differing working assumptions causing the confusion.  I’m afraid that not everyone touting his financial credentials online, in print, on radio, or on television necessarily wants to give solid financial advice but is more interested in making money for himself.  And if he makes a bold prediction or goes against the flow of what most others say or foresee, he garners more attention, more television interviews, more clicks to his website because he stands out—even if what he says is absurd.  As long as he can throw some numbers around, cite some statistics, he can sound authoritative. 

This is more common that we might believe.  I read a lot of articles about personal finance, in print and online, but there are some sources I’ve simply stopped reading.  One preaches nonsense, another is transparently throwing out click-bait to make money.  What is the ordinary investor to do?

My suggestion: find a couple of reliable sources for your financial advice.  Don’t live in fear over your future financial situation.   It probably is not as dire as you are being told.  Take a moment, whatever advice you are listening to or reading, to evaluate what the source has to gain by directing you to take specific actions.  Sometimes, they just need an audience or an increase in the number of people going to their website.  But some advisors might stand to make big commissions if you do as they tell you to.  Not everyone is looking out purely for your interests.  Remembering that, having a spending plan (budget), saving regularly, and living within (preferably below) your means will be key to a secure future financially.

Until next time,

Roger

“To show partiality is not good—yet a person will do wrong for a piece of bread.” Proverbs 28:21 NIV®*

 

*Scripture quotations taken from the Holy Bible, New International Version® NIV®

Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™

 

[By the way, I took that picture on a rut-filled, unpaved mountain road to a lodge in Alaska.  It was a joke.  There was also a sign at the top of the hill that read, “Freeway Ends in 500 Feet.”]